Wednesday, April 26, 2017

A New Scissors Crisis in Russia: Oil Prices Up But GDP Down

Paul
Goble

Staunton, April 26 – Over the past
year, the editors of Nezavisimaya gazeta
point out, the price of oil has risen by 60 percent but Russia’s GDP and per
capita incomes have continued to fall, a pattern at odds with what most
expected and one that points to ever more serious problems for Moscow and
Russians in the future.

For many years, Russian officials
have said and Russians have generally accepted the proposition that the country’s
GDP and per capita incomes are directly related to the price of oil. When it
goes up, they do; when it doesn’t; they fall. But over the past year, “the
price of oil rose 60 percent” but the others fell (ng.ru/editorial/2017-04-26/2_6982_red.html).

The average price of Urals oil in
the first quarter of 2016 was 31.99 US dollars a barrel. By the first quarter
of this year, it had risen 1.6 times, the editors of the Moscow paper say in a
lead article today. But the Russian economy “practically did not react at all
to this growth in prices” or “strictly speaking,” it reacted with “a small
decline” compared to the year before.

It cites the conclusion of Andrey
Klepach, the chief economist of the Foreign Economy Bank that “in the first
quarter of 2017, industry ceased to be the driver of growth. Processing
production showed a fall as a result of low investment demand and the gradual
slowing of growth of deliveries for export.”

The economist notes that “judging
from indirect assessments, investment activity in the start of the year again
began to fall. In the first quarter, the extent of construction substantially
contracted after what had been a positive dynamic in the second half of last
year.”But officials at the Central Bank
and the economic development ministry have claimed the opposite.

“Considering this from the side,”
the editors say, “one must acknowledge that the Russian Federation is immersed
in a world of parallel statistics,” official ones which suggest that everything
is going well and unofficial expert ones that do not support that conclusion.
As a result, independent experts long ago ceased to have much confidence in
official data.

Despite the underlying trends, the
paper notes, there has been a growth in consumer confidence in the first months
of this year, the result of low inflation and the strengthening ruble,
according to officials. “But there is another explanation,” the editors of
Nezavisimaya gazeta suggest.

And it is this: the one-time payment
to pensioners of a 5000-ruble (60 US dollars) supplement in January could easily
explain the small increases the government claims.But if that is the case, then, as Slepach
points out, it is “still too early” to be talking about stable growth, even if
oil prices are higher.